MaxLinear, Inc. Announces First Quarter 2022 Financial Results

In addition to these risks and uncertainties, investors should review the risks and uncertainties contained in our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 2, 2022, and our Current Reports on Form 8-K, as well as the information to be set forth under the caption “Risk Factors” in MaxLinear’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, which we expect to file soon. All forward-looking statements are based on the estimates, projections and assumptions of management as of April 27, 2022, and MaxLinear is under no obligation (and expressly disclaims any such obligation) to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

Use of Non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements presented on a basis consistent with GAAP, we disclose certain non-GAAP financial measures, including non-GAAP gross margin, operating expenses, operating expenses as a percentage of revenue, income from operations as percentage of revenue, and diluted earnings per share. These supplemental measures exclude the effects of (i) stock-based compensation expense; (ii) accruals related to our performance based bonus plan for 2022, which we currently intend to settle in shares of our common stock; (iii) accruals related to our performance based bonus plan for 2021, which we settled in shares of common stock in 2022; (iv) amortization of purchased intangible assets; (v) research and development funded by others; (vi) acquisition and integration costs related to our acquisitions; (vii) professional fees and settlement costs related to IP and commercial litigation matters; (viii) severance and other restructuring charges; (ix) other non-recurring interest and other income (expenses), net attributable to acquisitions and (x) non-cash income tax benefits and expenses. These non-GAAP measures are not in accordance with and do not serve as an alternative for GAAP. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our GAAP results of operations. These non-GAAP measures should only be viewed in conjunction with corresponding GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

We believe that non-GAAP financial measures can provide useful information to both management and investors by excluding certain non-cash and other one-time expenses that are not indicative of our core operating results. Among other uses, our management uses non-GAAP measures to compare our performance relative to forecasts and strategic plans and to benchmark our performance externally against competitors. In addition, management’s incentive compensation will be determined in part using these non-GAAP measures because we believe non-GAAP measures better reflect our core operating performance.

The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures:

Stock-based compensation expense relates to equity incentive awards granted to our employees, directors, and consultants. Our equity incentive plans are important components of our employee incentive compensation arrangements and are reflected as expenses in our GAAP results. Stock-based compensation expense has been and will continue to be a significant recurring expense for MaxLinear. While we include the dilutive impact of equity awards in weighted average shares outstanding, the expense associated with stock-based awards reflects a non-cash charge that we exclude from non-GAAP net income.

Bonuses under our executive and non-executive bonus programs have been excluded from our non-GAAP net income for all periods reported. Bonus payments for the 2021 performance periods were settled through the issuance of shares of common stock under our equity incentive plans in February 2022. We currently expect that bonus awards under our fiscal 2022 program will be settled in common stock in the first quarter of fiscal 2023.

Expenses incurred in relation to acquisitions include amortization of purchased intangible assets, acquisition and integration costs primarily consisting of professional and consulting fees, and accretion of discount on deferred purchase price payments to interest expense. Gains related to acquisitions include a gain on sale of an investment in a privately-held entity included in interest and other income in the fourth quarter of 2021.

Research and development funded by others represents proceeds received under contracts for jointly funded R&D projects to develop technology that may be commercialized into a product in the future. Initially such proceeds may not yet be recognized in GAAP results if, pursuant to contract terms, the Company may required to repay all or a portion of the funds provided by the other party under certain conditions. Management believes it is not probable that it will trigger such conditions. Once such conditions have been resolved, the proceeds are recognized in GAAP results, and accordingly, reversed from non-GAAP results.

Restructuring charges incurred are related to our restructuring plans which eliminate redundancies and primarily include severance and restructuring costs related to impairment of leased right-of-use assets or from exiting certain facilities.

Expenses incurred in relation to our intellectual property and commercial litigation include professional fees incurred.

Income tax benefits and expense adjustments are those that do not affect cash income taxes payable.

Reconciliations of non-GAAP measures for the historic periods disclosed in this press release appear below. Because of the inherent uncertainty associated with our ability to project future charges, particularly related to stock-based compensation and its related tax effects as well as potential impairments, a quantitative reconciliation is not available without unreasonable efforts and accordingly, we have not provided a reconciliation for non-GAAP guidance provided for the second quarter 2022.

About MaxLinear, Inc.

MaxLinear, Inc. (NASDAQ: MXL) is a leading provider of radio frequency (RF), analog, digital and mixed-signal integrated circuits for access and connectivity, wired and wireless infrastructure, and industrial and multi-market applications. MaxLinear is headquartered in Carlsbad, California. For more information, please visit www.maxlinear.com.

MXL is MaxLinear’s registered trademark. Other trademarks appearing herein are the property of their respective owners.

MAXLINEAR, INC. UNAUDITED GAAP CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data)

	Three Months Ended
	March 31, 2022			December 31, 2021			March 31, 2021
Net revenue	$	263,927		$	247,889		$	209,359
Cost of net revenue		109,337			106,112			97,640
Gross profit		154,590			141,777			111,719
Operating expenses:
Research and development		65,886			73,320			63,166
Selling, general and administrative		40,577			39,120			36,469
Restructuring charges		—			—			2,166
Total operating expenses		106,463			112,440			101,801
Income from operations		48,127			29,337			9,918
Interest income		31			32			—
Interest expense		(2,349	)		(2,400	)		(4,206	)
Other income (expense), net		(770	)		1,510			(104	)
Total other income (expense), net		(3,088	)		(858	)		(4,310	)
Income before income taxes		45,039			28,479			5,608
Income tax provision		11,453			303			1,806
Net income	$	33,586		$	28,176		$	3,802
Net income per share:
Basic	$	0.44		$	0.37		$	0.05
Diluted	$	0.42		$	0.35		$	0.05
Shares used to compute net income per share:
Basic		77,192			76,755			74,852
Diluted		80,641			81,567			78,283

MAXLINEAR, INC. UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

	Three Months Ended
	March 31, 2022			December 31, 2021			March 31, 2021
Operating Activities
Net income	$	33,586		$	28,176		$	3,802
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation		23,880			24,353			22,325
Amortization of debt issuance costs and accretion of discount on debt and leases		486			416			844
Stock-based compensation		18,554			16,415			12,955
Deferred income taxes		6,842			(4,640	)		541
Loss on disposal of property and equipment		159			—			368
Unrealized holding loss on investments		954			—			—
Impairment of leasehold improvements		—			—			226
Impairment of leased right-of-use assets		—			—			429
(Gain) loss on foreign currency and other		(316	)		250			21
Excess tax benefits on stock based awards		(7,120	)		(2,046	)		(1,809	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(5,969	)		(12,265	)		(20,079	)
Inventory		(7,338	)		(4,249	)		5,658
Prepaid expenses and other assets		3,503			(9,301	)		29,860
Leased right-of-use assets		—			—			36
Accounts payable, accrued expenses and other current liabilities		32,952			(22,283	)		(22,032	)
Accrued compensation		12,237			9,746			1,376
Accrued price protection liability		27,975			(8,956	)		7,299
Lease liabilities		(3,301	)		(2,835	)		(2,002	)
Other long-term liabilities		(2,918	)		3,252			454
Net cash provided by operating activities		134,166			16,033			40,272
Investing Activities
Purchases of property and equipment		(4,800	)		(12,242	)		(6,152	)
Purchases of intangible assets		(4,637	)		(965	)		(1,112	)
Cash used in acquisitions, net of cash acquired		—			(5,000	)		—
Proceeds loaned under notes receivable		(10,000	)		—			—
Purchases of investments		(23,325	)		—			(5,000	)
Net cash used in investing activities		(42,762	)		(18,207	)		(12,264	)
Financing Activities
Payment of debt issuance cost		—			(29	)		—
Repayment of debt		(20,000	)		(20,000	)		(20,000	)
Net proceeds from issuance of common stock		87			2,494			1,298
Minimum tax withholding paid on behalf of employees for restricted stock units		(24,449	)		(2,068	)		(7,442	)
Repurchase of common stock		(26,297	)		(15,403	)		(2,673	)
Net cash used in financing activities		(70,659	)		(35,006	)		(28,817	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(230	)		(1,636	)		(32	)
Increase (decrease) in cash, cash equivalents and restricted cash		20,515			(38,816	)		(841	)
Cash, cash equivalents and restricted cash at beginning of period		131,738			170,554			150,034
Cash, cash equivalents and restricted cash at end of period	$	152,253		$	131,738		$	149,193

MAXLINEAR, INC. UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)

	March 31, 2022		December 31, 2021		March 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	151,111	$	130,572	$	148,095
Short-term restricted cash		105		105		114
Short-term investments		19,051		—		—
Accounts receivable, net		125,693		119,724		87,521
Inventory		139,041		131,703		92,154
Prepaid expenses and other current assets		19,575		22,000		17,096
Total current assets		454,576		404,104		344,980
Long-term restricted cash		1,037		1,061		984
Property and equipment, net		60,022		60,924		40,787
Leased right-of-use assets		32,919		27,269		24,403
Intangible assets, net		140,153		152,540		191,542
Goodwill		306,713		306,668		302,828
Deferred tax assets		82,326		89,168		85,524
Other long-term assets		21,381		8,650		7,551
Total assets	$	1,099,127	$	1,050,384	$	998,599

Liabilities and stockholders’ equity
Current liabilities	$	234,795	$	207,395	$	197,637
Long-term lease liabilities		30,208		24,640		22,419
Long-term debt		286,298		306,153		344,116
Other long-term liabilities		19,980		22,998		13,649
Stockholders’ equity		527,846		489,198		420,778
Total liabilities and stockholders’ equity	$	1,099,127	$	1,050,384	$	998,599

MAXLINEAR, INC. UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS (in thousands, except per share data)

	Three Months Ended
	March 31, 2022			December 31, 2021			March 31, 2021
GAAP gross profit	$	154,590		$	141,777		$	111,719
Stock-based compensation		163			152			169
Performance based equity		112			137			82
Amortization of purchased intangible assets		10,811			10,759			10,747
Non-GAAP gross profit		165,676			152,825			122,717

GAAP R&D expenses		65,886			73,320			63,166
Stock-based compensation		(9,676	)		(8,243	)		(7,162	)
Performance based equity		(5,337	)		(8,224	)		(4,598	)
Research and development funded by others		2,800			(2,000	)		—
Acquisition and integration costs		—			(25	)		(92	)
Non-GAAP R&D expenses		53,673			54,828			51,314

GAAP SG&A expenses		40,577			39,120			36,469
Stock-based compensation		(8,715	)		(8,020	)		(5,624	)
Performance based equity		(2,068	)		(3,934	)		(1,890	)
Amortization of purchased intangible assets		(6,176	)		(5,928	)		(6,070	)
Acquisition and integration costs		5			(192	)		(1,561	)
IP litigation costs, net		—			—			(11	)
Non-GAAP SG&A expenses		23,623			21,046			21,313

GAAP restructuring expenses		—			—			2,166
Restructuring charges		—			—			(2,166	)
Non-GAAP restructuring expenses		—			—			—

GAAP income from operations		48,127			29,337			9,918
Total non-GAAP adjustments		40,253			47,614			40,172
Non-GAAP income from operations		88,380			76,951			50,090

GAAP interest and other income (expense), net		(3,088	)		(858	)		(4,310	)
Non-recurring interest and other income (expense), net		68			(1,893	)		310
Non-GAAP interest and other income (expense), net		(3,020	)		(2,751	)		(4,000	)

GAAP income before income taxes		45,039			28,479			5,608
Total non-GAAP adjustments		40,321			45,721			40,482
Non-GAAP income before income taxes		85,360			74,200			46,090

GAAP income tax provision		11,453			303			1,806
Adjustment for non-cash tax benefits/expenses		(6,331	)		4,149			959
Non-GAAP income tax provision		5,122			4,452			2,765

GAAP net income		33,586			28,176			3,802
Total non-GAAP adjustments before income taxes		40,321			45,721			40,482
Less: total tax adjustments		(6,331	)		4,149			959
Non-GAAP net income	$	80,238		$	69,748		$	43,325

Shares used in computing non-GAAP basic net income per share		77,192			76,755			74,852
Shares used in computing non-GAAP diluted net income per share		80,641			81,567			78,283
Non-GAAP basic net income per share	$	1.04		$	0.91		$	0.58
Non-GAAP diluted net income per share	$	1.00		$	0.86		$	0.55

MAXLINEAR, INC. UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

	Three Months Ended
	March 31, 2022		December 31, 2021		March 31, 2021
GAAP gross profit	58.6	%	57.2	%	53.4	%
Stock-based compensation	0.1	%	0.1	%	0.1	%
Performance based equity	—	%	0.1	%	—	%
Amortization of purchased intangible assets	4.1	%	4.3	%	5.1	%
Non-GAAP gross profit	62.8	%	61.7	%	58.6	%

GAAP R&D expenses	25.0	%	29.6	%	30.2	%
Stock-based compensation	(3.7	) %	(3.3	) %	(3.4	) %
Performance based equity	(2.0	) %	(3.3	) %	(2.2	) %
Research and development funded by others	1.1	%	(0.8	) %	—	%
Acquisition and integration costs	—	%	—	%	—	%
Non-GAAP R&D expenses	20.3	%	22.1	%	24.5	%

GAAP SG&A expenses	15.4	%	15.8	%	17.4	%
Stock-based compensation	(3.3	) %	(3.2	) %	(2.7	) %
Performance based equity	(0.8	) %	(1.6	) %	(0.9	) %
Amortization of purchased intangible assets	(2.3	) %	(2.4	) %	(2.9	) %
Acquisition and integration costs	—	%	(0.1	) %	(0.8	) %
IP litigation costs, net	—	%	—	%	—	%
Non-GAAP SG&A expenses	9.0	%	8.5	%	10.2	%

GAAP restructuring expenses	—	%	—	%	1.0	%
Restructuring charges	—	%	—	%	(1.0	) %
Non-GAAP restructuring expenses	—	%	—	%	—	%

GAAP income from operations	18.2	%	11.8	%	4.7	%
Total non-GAAP adjustments	15.3	%	19.2	%	19.2	%
Non-GAAP income from operations	33.5	%	31.0	%	23.9	%

GAAP interest and other income (expense), net	(1.2	) %	(0.4	) %	(2.1	) %
Non-recurring interest and other income (expense), net	—	%	(0.8	) %	0.2	%
Non-GAAP interest and other income (expense), net	(1.1	) %	(1.1	) %	(1.9	) %

GAAP income before income taxes	17.1	%	11.5	%	2.7	%
Total non-GAAP adjustments before income taxes	15.3	%	18.4	%	19.3	%
Non-GAAP income before income taxes	32.3	%	29.9	%	22.0	%

GAAP income tax provision	4.3	%	0.1	%	0.9	%
Adjustment for non-cash tax benefits/expenses	(2.4	) %	1.7	%	0.5	%
Non-GAAP income tax provision	1.9	%	1.8	%	1.3	%

GAAP net income	12.7	%	11.4	%	1.8	%
Total non-GAAP adjustments before income taxes	15.3	%	18.4	%	19.3	%
Less: total tax adjustments	(2.4	) %	1.7	%	0.5	%
Non-GAAP net income	30.4	%	28.1	%	20.7	%

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